Foreign portfolio investors (FPIs) have poured in nearly Rs 52,910 crore into Indian stocks and bonds this month up to July 26. This surge is driven by the Union Budget 2024-2025, which aims to create a stable investment environment.
Market experts, using data from the National Securities Depository Limited (NSDL), revealed that FPIs have invested Rs 33,688 crore in equity and Rs 19,222 crore in debt so far this month.
For the year-to-date, FPI investment in equity is Rs 36,888 crore, while debt investment is Rs 87,846 crore.
Analysts noted that this significant inflow into domestic mutual funds, combined with strong retail investor activity, has bolstered domestic investors against their foreign counterparts. They attribute the quick recovery in capital markets to positive sentiment and the government’s promise of ongoing reforms.
The budget focuses on capital allocation and policies to boost various sectors, supporting long-term economic growth. It also includes a comprehensive review of indirect tax rates to simplify trade, eliminate duty inversions, and reduce disputes.
The budget proposes increasing short-term capital gains (STCG) tax from 15% to 20% and long-term capital gains (LTCG) tax from 10% to 12.5%. While this may temporarily affect market sentiment, Pantomath Capital Advisors believes it won’t alter the positive inflow into the equity market due to the strong long-term outlook.
India’s growth story remains strong, with improved manufacturing sentiment in the April-June quarter. Demand conditions are robust and may further improve with good monsoon progress.
The budget’s focus on infrastructure, the rural sector, and employment generation is expected to boost economic activity and consumption.
A recent survey showed business activity hit a three-month high in July, with strong performance in the services sector and increased manufacturing momentum. This led to the fastest hiring pace in 18 years.
India continues to be the fastest-growing major economy, with a growth rate of over 8% in 2023-24.
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